Friday, April 06, 2018

What if America Loses Its Trade War with China?



So far its a war of tariffs and countervailing tariffs, tit for tat, but it is escalating and that seems to be Washington's doing, not Beijing's. Donald Trump is plainly out to force the Chinese into submission but it's a gamble that could backfire on the Mango Mussolini.

China's leaders sound supremely confident that they can win a trade war with President Donald Trump. 
The state news media has depicted him as a reckless bully intent on undermining the global trading system, while presenting the Chinese government as a fair-minded champion of free trade. And China's leader, Xi Jinping, has used the standoff to reinforce the Communist Party's message that the United States is determined to stop China's rise — but that it no longer can. China is already too strong, its economy too big.

In the political realm, however, Xi enjoys advantages that may allow him to cope with the economic fallout far better than Trump can. His authoritarian grip on the news media and the party means there is little room for criticism of his policies, even as Trump must contend with complaints from US companies and consumers before important midterm elections in November. 
The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from US tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy. 
"My impression is that there is in Washington an exaggerated sense of how painful these tariffs might be" in China, said Arthur R. Kroeber, managing director of Gavekal Dragonomics, a research firm in Beijing.
At worst, he estimated, the US actions could shave one- tenth of a percentage point off China's economic growth — hardly enough to force a drastic reversal of policies, given the enormous benefits that Chinese leaders see in the state-heavy economic model they have relied on in recent decades.

At the same time, Chinese officials seem to believe they can take advantage of what they consider vulnerabilities in the US political system.
Ultimately the question is what Trump would do if, after escalating what began as a petty trade squabble but grew into a major power death match, America did not prevail or even came off worse than the Chinese?  Trump is a bully, through and through, and China isn't budging which is usually where bullies fall apart. The American mid-terms are just half a year away and the Chinese are targeting Red State America. Cohn warned Trump not to do it and resigned in protest, leaving the way clear for Trump to appoint Larry "Wrong Way" Kudlow his successor. Trump has now surrounded himself with sycophants. Mattis and even Kelly may be nearing their "best before" date.

This could turn weird sooner than we might imagine.

Update;

Here's Krugman's take:

So is a trade war coming? Nobody knows — even, or perhaps especially, Trump himself. For while trade is one of Trump’s two signature issues — animus toward dark-skinned people being the other — when it comes to making actual demands on other countries, the tweeter in chief and his aides either don’t know what they want or they want things that our trading partners can’t deliver. Not won’t — can’t. 
As a result, incoherence rules: The administration lashes out, then tries to calm markets by saying that it might not carry through on its threats, then makes a new round of threats.

Why is “bilateral” trade between the U.S. and China so unbalanced? The answer is that it’s largely a kind of statistical illusion. China is the Great Assembler: it’s where components from other countries, like Japan and South Korea, are put together into consumer products for the U.S. market. So a lot of what we import from China is really produced elsewhere
It’s not clear why we should demand that China stop playing that role. Indeed, it’s not clear that China could even do much to reduce its bilateral surplus with the U.S.: To do so, it would basically have to have a completely different economy. And this just isn’t going to happen unless we have a full-blown trade war that shuts down much of the global economy as we know it.
It turns out Canada is also in a similar situation. For example, goods destined for the American market may be offloaded on Vancouver docks for transshipment but, when the arrive at the US border, they're logged as Canadian exports. All we had to do with it was to unload the freighters and put those containers on trucks for the trip south. But, such is life in the age of Trump.


19 comments:

Karl Kolchak said...

It would be America's "Suez Moment." As an American who has ardently opposed all of our post 9/11 war crimes, I say it can't happen a moment too soon.

Regarding your previous post--that is the same Madeleine Albright who said on 60 Minuets that 500,000 dead Iraqi children (from Clinton's economic sanctions) was "worth it." Personally, I prefer my human monsters to be right out in the open like Trump. It's the con artists like Albright, Obama and the Clintons who often get away with doing the most damage.

The Mound of Sound said...


One thing they didn't damage, Karl, was your democracy.

Anonymous said...

"Why is “bilateral” trade between the U.S. and China so unbalanced? The answer is that it’s largely a kind of statistical illusion"
What a statement , and people wonder why people lost faith in the establishment .
"China is the Great Assembler"
I wonder who that happened

Lorne said...

Another thing to remember, but perhaps this is too much for Trump to accept or understand, is the fact that China holds the majority of debt incurred by 'the greatest country on earth." Should the tiger roar, America would have little defence.

The Mound of Sound said...


Well, Anon, if you genuinely wonder how that happened look no further than the neoliberal era ushered in by Thatcher and Mulroney. Free trade globalism all the way just as professors Hayek and Friedman ordained. No effort was made to deter American corporations from moving their manufacturing to low wage alternatives overseas. With an eye to profits and dividends rather than the long-term consequences, all those noble companies cut their US employees loose. That was always the Republican way and it worked. Germany almost followed suit but reversed course which revived its endangered industries wonderfully.

Ask yourself this? Where did Trump get the steel for Trump Tower? Where is all his merch manufactured? It sure ain't the US of A. Ditto for his daughter/bride, Ivanka.

I don't wonder why the American people "lost faith in the establishment." It's because most of them are Gullibillies, capable of falling for just about anything. FOX News realized there was wealth to be had by stuffing nonsense into that great vacuum between those countless ears.

The Mound of Sound said...


I don't think the Tiger will roar, Lorne. The Chinese are too smart to act precipitously in a way that could crater the world economy. They want to get ahead of America and there are better ways of doing that than starting a run on US government securities.

The Mound of Sound said...

Sorry, Anon, I meant "Reagan, Thatcher and Mulroney." Mulroney was only a bit player in the free trade prototype, the FTA that evolved into NAFTA.

Jay Farquharson said...

"8For example, goods destined for the American market may be offloaded on Vancouver docks for transshipment but, when the arrive at the US border, they're logged as Canadian exports. All we had to do with it was to unload the freighters and put those containers on trucks for the trip south. But, such is life in the age of Trump."

Nope, country of origin rules are pretty clear in all trade agreements including the WTO.

"Significant value", or "the whole is greater than the sum of it's parts", has to be added, to change COO. A bulk device from China, Brand packaged in Vancouver, with an Multilingual Instruction Manual, is still a Product of China. A bulk device, Brand packaged in Vancouver, with Canadian software downloaded and quality tested, would count as a Product of Canada.

As for Treason Tribbles MAGA Trade War,

Treason Tribble twitted $25 billion, Commerce drew up a list of raw materials, ( that badly hurts Red State Manufacturing), and Treasury, who actually impose santions, said Twit's arn't actually US Policy, and that there might be sanctions imposed in 2019, if the unarranged, unscheduled, undefined trade talks with China, some time in the future, don't go well.

China responded by drawing up a list, forming sanctions, and putting the bureaucratic paperwork in place, on $25 billion of imports from the US, targeting Red States, mostly ag products, and distributed the lists to Industry and the Authorities, all in 3 days.

Then, Treason Tribble twitted another $25 billion, Commerce is still trying to figure out what to sanction, Treasury is trying to reassure the markets with moe "it's just twit's, it's not policy",

Who is Sec. State again?

China's next $25 billion will be ready to go on Monday and will kill off the rest of US Ag to China, ( 46% of farmer's exports, and the only thing that caused a recovery after Chimpy McStagger's Great Recession and Bank Robbery),

Then, Treason Tribble twitted $100 billion, Commerce is going WTF? Treasury is going WTF? Walmart's going WTF? The only way the US can get to $100 billion is to target Consumer products from electronics to clothing to plastic wear and toothbrushes.

China's going WTF?

$25 billion plus $25 billion plus $100 billion is $150 billion, which is about $20 more than everything we import from the US combined. Where do we apply the other $20 billion? To US Corporations subsidiaries overseas?

Who's the US Secretary of State, in charge of the Treasury, who's actually incharge of imposing Sanctions again?

If the US does "pull the trigger", this is going to be the shortest Trade War in history since the War of the Croissants.

Anonymous said...

"China is the Great Assembler: it’s where components from other countries, like Japan and South Korea, are put together into consumer products for the U.S. market. So a lot of what we import from China is really produced elsewhere."

Horsefeathers. If you search for such nonsense, you find references from 2006 and earlier. My hobby is cars - since 15 years ago, a myriad of parts suppliers from the US, Japan, Korea and Europe have opened factories in China. Toyota, Nissan, Honda and GM send parts back to their homelands to incorporate into new vehicle production. Krugman hasn't a clue. Arguing based on false premises will get you to the wrong answers every time.

The articles in all the business press I've read in the past week point out China's limited options due to all the stuff now made there. This post argues the opposite of conventional wisdom. With 330 million people lifted into reasonable wealth, why in hell would China assemble other people's parts? The answer is that 2006 was over a dozen years ago, and things have greatly changed.

And I couldn't care less what silly thoughts Krugman has. He's not correct.

BM

The Mound of Sound said...


Well, BM, I guess I'll have to weigh your Nobel prize against Krugman's. It seems to me it's his business to know what he's talking about. That has a lot to do with how he's made his living as an academic and a writer for decades. One of you is plainly addled. If it's Krugman he'll probably be tossed out of the halls of academia and the NYT in short order. Shall we wait and see?

The Mound of Sound said...

Jay, I believe the name you're looking for is John Bolton, a guy with an apparent desire to bomb China.

Jay Farquharson said...

Did you cut and paste the Brexiteer's "German Car Manufacturer's " argument?

Oh yes, you did.

Gotta love all the Anonymice leaving, well, we'll call them tracks, over the web.

The Mound of Sound said...

Sorry, Jay. I should have said the also bellicose Pompeo is state sec. Bolton, if he ever gets a security clearance, will be NSA director.

Anonymous said...

Mound, I believe the Sec of State position is currently vacant. Pompeo's confirmation hearing isn't until April 12th.

Cap

Jay Farquharson said...

Right now, there is no Secretary of State.

Pompeo's been mentioned, but he would have to be re-confirmed, which probably won't happen.

It's now being seen as a reason, Session's won't be "your fired" by one of Treason Tribbles Minions via Twitter, and replacement would have to be confirmed or reconfirmed, which probably won't happen, leaving Rosenstien in charge, and "unfireable".

Too bad that nobody in Treason Tribble's orbit's ever read the Constitution.

Jay Farquharson said...

Oh, BTW, Bolton's tagged for the National Security Adviser, and he doesn't need to be confirmed, as it's an Administrative post inside the White Supremacy House, not a Directorial post in charge of an Agency or Department.

He does have to pass a National Security Background check, which given his PAC's ties to Anal, the Mercers, Russian Ratfucking and Russian money and Ogliarches, might be a problem.

The Mound of Sound said...


Jay, what if Trump dispenses with a secretary of state or national security advisor or other key cabinet posts and opts instead for a more monarchial system of envoys? A gaggle of deputy-level technocrats to run the day to day operations and rogue advisors like Bolton functioning in a more corporate structure.

Jay Farquharson said...

For what we would call "The Ministries", there's a chain of Command buried in the Constitution and a host of Laws.

No "Minister", and the President has no hire/fire input into the Ministry. Technically, the people in the "Ministries", are bound by the laws and the Constitution, the only person "bound" in any way to the President, ( and even then, Laws and the Constitution are supposed to come first), is the "Minister".

Underneath the "Minister", ( I use that term because there are a lot of different titles in the US by Department) are the Undersecretaries. State has 48. If Treason Twitler wanted something done, he'd have to either know where the responsibility lay, ( he has no clue, nor do many in the White Supremacy House), or he'd have to gather them all together, and in most cases, they'd be trying to figure out what the hell he wanted, so they would know who's department it was, while he would get more and more angry at their questions.

How well does a Corporation run, with no CFO, no VP's and no Department heads between the CEO, and Middle Management?

As for the National Security Advisor, it's a "gofor" position to the President, between the President and all the different Agencies and Departments of the National Security State from the Joint Chiefs of Staff, to the NRO.

The National Security Advisor is the guy who carries the intel, capabilities and contingencies, from the various groups, to the President, on a "issue", once the President has an idea, or a "plan", the Advisor coordinates all the Agencies and Department's, into turning it into a "Combined Action Plan", and has to carry any stumbles, roadblocks or impossibilities discovered, back up to the President, for modification.

The National Security Advisor is the President's "dotter of i's and crosser of t's". For example, The Parade. Route selection, geophysical engineering, transportation, security, DC Police, FBI and Intel, manhole covers welded, composition of the Parade, sanitation and sewage, etc. The National Security Advisor has to make sure "everything" is covered off, everybody's on the same page, and that it meets the President's expectations.

So, how well do you think Treason Tribbles Minion's will function as Royal Envoys, given their current infighting, and there demonstrated ability in not knowing anything about the 5 W's of the US Government?

Do you think Treason Tribble is capable of twitting to the right section of the Treasury that oversees the writing and imposition of sanctions? Or Jarvanka know's which door in the NRO leads to the Director of South East Asian telemetry?

Karl Kolchak said...

@Mound--just read your response "one thing they didn't damage was your democracy."

Au contrarie--Obama effectively completed the 30 year project that has turned the U.S. into a one party state. The Reps and Dems fight merely for show, while both support the same murderous foreign policies and 1% enriching economic policies (I worked for the USG in Washington for 22 years and saw this happening up close). We have no more "democracy" left in us than did the old Soviet Union. The difference is that the average Soviet citizen KNEW their elections were BS.